Road Home rebuilding covenants have had mixed results, review suggests

Ted Jackson/The Times-PicayuneThe Beacon of Hope study categorizes this house at 327 28th St. in Lakeview as uninhabitable. Duane Carroll says he has stopped restoration of his mother's home while waiting for it to be raised. He's not worried about the Road Home deadline, saying, 'What are they going to do, bulldoze it?'

Fran Vincent, 80, got a grant from the state's Road Home program three years ago to fix her flooded home on Gen. Haig Street in Lakeview. Now, less than two months before covenants she signed require her to reoccupy it, the house sits gutted.

Her son Kenny, who closed down his Fat City nightclub, Kenny's Key West, and started a hauling company when his mother got her grant, said a lot of his mother's Road Home money is gone. It will be hard to get his childhood home rebuilt by the deadline, he said.

"Maybe by the end of the year," he said. "It's a Catch-22. If you crunch all the numbers, they'll crush you. But she won't leave Lakeview. The bottom line is I'll have to work a little harder and lend her the money."

Vincent is hardly alone. Nearly a third of homeowners who got Road Home grants and signed legal covenants promising to rebuild and reoccupy their homes in three years haven't done so yet, according to a new survey of nearly 14,000 New Orleans residential properties.

What's more, while Road Home applicants got their grants on different days and thus have different deadlines to comply with the occupancy covenants, the survey found that nearly a quarter of those facing deadlines by the end of this month either have not finished rebuilding or have yet to begin construction.

Option 1

More than 40,000 New Orleans homeowners chose Road Home's Option 1, requiring them to use their grant money to rebuild and reoccupy their home within three years. The choice also gave them the option of selling the home to someone who would comply with the covenants.

View full sizeTed Jackson/The Times-PicayuneThe Beacon of Hope survey categorizes this property in the 3100 block of New Orleans Street as not gutted.

The community group Beacon of Hope took action last year to find out how well people were complying, calling on volunteers from a dozen neighborhood organizations to assess every property in person over the last six months. Their review of every house in Gentilly Terrace and Gardens, Hollygrove-Dixon, Lakeview, Lakewood, Milneburg, Mirabeau Gardens, Navarre, Oak Park, Paris Oaks, Seabrook, Sugar Hill and West End turned up 5,700 properties that are subject to the Road Home covenants.

What they found calls into question the effectiveness of the covenants and the way the state has chosen to monitor and enforce them. And with such a large sample, the data also suggest the state could have given as much as $500 million in federal rebuilding grants to New Orleanians who may never rebuild.

For the city at large, the data suggest the city is facing an uphill battle in its long-term struggle to eradicate blight. Already, New Orleans has a greater percentage of blighted property than any major American city, by a wide margin.

It's worth noting that, because the Beacon data is in some cases six months old, some houses flagged by the organization as still-unfixed are now in better shape than the survey suggests. Spot visits by The Times-Picayune to specific properties found that several listed as gutted have since been renovated and appear to be occupied.

But the survey results are still troubling. As the state pores over them, along with postal and utility activity cross-referenced with Road Home grant recipients, it must distinguish between those who have failed to rebuild in spite of their best efforts and those who have simply absconded with the money.

Outreach program urged

Beacon of Hope leaders went to the state last month to suggest hiring their organization -- "or anyone, for that matter," president Denise Thornton said -- to conduct an outreach program to identify and address homeowners' hardships.

The Louisiana Recovery Authority rejected the proposal. Instead, the state is sending monitoring letters to grant recipients at the addresses they listed when they got their money, asking them to update the state on their progress. If they don't respond, the state follows up with a phone call, spokeswoman Christina Stephens said.

Thornton scoffs at what she calls the state's "lackadaisical" approach.

View full sizeTed Jackson/The Times-PicayuneThe Beacon of Hope survey listed the property at 1494 Perlita as being 'in progress.' There is a building permit in the window, but very little work has been done.

On Friday, Stephens said the LRA has begun "serious discussions about more robust monitoring." She said the state may add staff to personally visit every house that got Road Home money and isn't rebuilt.

On the surface, it seems potential offenders would be the owners of vacant lots, empty slabs, gutted structures, or worse, the few damaged houses that appear almost untouched since the storm.

In the surveyed neighborhoods there were 1,817 still-unoccupied properties that got Road Home money to rebuild. Of those, six of every 10 of those appear to have made little to no progress.

There are whole swaths of Lakeview and Gentilly where 10 or more lots on every block got Road Home rebuilding money but are still vacant or uninhabitable.

Of the unoccupied homes, 40 percent have had at least some construction done. But it's difficult to know what is holding up their completion. Some have run out of money and stopped working. Other homes identified by survey teams last year have since been finished and the owners -- either the original grant recipient or someone who bought the unfixed house from the grantee and took on the responsibilities spelled out in the Road Home covenants -- have moved back in.

Three-year covenant deadline

The picture is becoming clearer as time goes on because more properties are reaching their three-year covenant deadlines. By the end of this month, 2,308 of the New Orleans properties must be reoccupied, and 23 percent of them are not. By the end of the year, 33,372 properties in the city must be completed -- 83 percent of all rebuilding grants citywide.

As more deadlines arrive, the state's Office of Community Development, which oversees Road Home, finds itself in an increasingly difficult position. It must assure the federal Department of Housing and Urban Development that it's monitoring the use of the federal aid sent by Congress, but it has already admitted that the Road Home program's pace and design left many people short of the money they needed to complete construction. It also left the grant money they did get unprotected.

HUD and the state share responsibility for those defects in the program.

The state initially calculated Road Home grants based on pre-storm home values, and not the construction costs that exploded after the storm. But then, HUD blindsided then-Gov. Kathleen Blanco with a March 2007 ruling that the state could no longer pay Road Home grants in installments as work got done, which caused the state to instead pay simple "compensation grants" in a lump sum.

Looking back, Stephens said state leaders wish they had held firm against HUD.

"Knowing what we know now, we should have just kept a reconstruction program. We would have done all of the environmental reviews and it would have taken longer to pay people, but we wouldn't have to worry about this level of monitoring," she said.

By paying people in a lump sum, the covenants became the only legal mechanism to try to ensure the money was used for rebuilding, and almost immediately, homeowners began to assume the state wouldn't be able to monitor who was complying and who wasn't. Even if it was able to, conventional wisdom said that the state wouldn't be inclined to try to take back the grant money in thousands of civil court cases.

Generally, that assumption has proved correct. Stephens acknowledges that the state would rather find ways to get recipients more help than to pursue grant recovery. Last month, when the HUD inspector general looked at the elevation portion of the Road Home grants and found almost 80 percent of recipients hadn't elevated, he urged the state to be more aggressive about taking the money back. The state's official response was that it would take the money back in cases of fraud, but otherwise would look for other ways to help noncompliant homeowners.

The HUD inspector general in Washington, who has a field office in New Orleans to look after the Road Home and other federal hurricane-recovery dollars, took note of the Beacon of Hope findings. Spokesman Michael Zerega said the IG expects the state to enforce the covenants and take money back from those who don't comply. He didn't recommend one way of monitoring over another, but said federal agents will be watching, too.

"We're going to be watching whether people are really making good-faith efforts to use the funds in the correct way and if not, we'll take steps to recover them," he said.

Piecemeal grant payments

It's not always the homeowner's fault that the work isn't done. It took the state and Road Home contractor ICF International about two years after Katrina to pay most of the compensation grants, and another two years for state policymakers to roll out supplemental aid meant to "fill gaps" for low-income applicants and others who lost their first grants to contractor fraud or simply never got enough to finish the job.

View full sizeTed Jackson/The Times-PicayuneThe Beacon of Hope survey categorizes this property at 4017-4019 Hamilton St. as uninhabitable.

Thornton said such drawn-out and piecemeal grant payments have forced many homeowners to spend their money on living expenses or to pay down debt. As LRA Housing Chairman Walter Leger noted Friday, some mortgage companies pressured grant recipients to pay off their loans as soon as they got the money, leaving them nothing to finance their rebuilding work. Some 20,000 homeowners of modest means qualified for additional grant money last fall, but again, the idea that it will cover their gap costs is based on the assumption that the money they got two years ago is still there.

The LRA wants to request approval from HUD to use half of the $200 million left in the Road Home budget to help banks offer low-interest loans to Road Home recipients who can show a remaining need. Loan payments would be tied to rebuilding.

Why throw more money at these homeowners? "If we take their grant money away, they definitely won't rebuild," Stephens said.

Thornton's biggest fear is that Road Home-financed properties end up not only unoccupied, but blighted. According to Beacon of Hope's analysis, half of the 106 Lakeview properties cited by city code enforcement officers between July 2008 and June 2009 had also received Road Home rebuilding grants.

But Allison Plyer, director of the Greater New Orleans Community Data Center, said there could be a way out. The LRA is considering a new process that would let failed rebuilders keep their grant money as long as they agree to transfer title to the property to the state's Land Trust, which has already collected, cleared and maintained about 10,000 lots from those who chose the Road Home's buyout options. That would at least cut down the blight and allow local governments to use various programs to try to redevelop the lots.

"Really, this is a tremendous opportunity because nationwide the most aggressive blight policy is in Baltimore, and they're trying to address 5,000 properties. The state of Louisiana actually has legal standing (through the covenants) to influence 10,000, twice the number in Baltimore," she said. "A lot of folks at the state level have said they want to see some of the disaster recovery dollars used to eradicate blight. Well, if the state says it wants to do something about blight, they should start by looking at the Road Home Option 1 properties."